Lourenco Goncalves: Yes, look — good morning, Bill. Look, first of all, we are seeing our first quarter that is pretty stable in comparison with what we were seeing last year. Remember, last year, everybody was expecting the hard landing, expecting the Armageddon, the catastrophe, and inflation would take over, the world would come to an end. And all of a sudden, everything was great. Everything was okay. And we were fine in terms of soft landing. The other thing that influenced last year was not even the strike that the UAW called on the big three in Detroit, the big three car manufacturers in Detroit, because that was actually a good thing for us as a supplier, a major supplier of automotive, to the point that the car manufacturers were building inventories in anticipation of the strike.
And then when the strike was not as bad or as long as they were anticipating, they continued buying. So we were very mildly affected, only at the very tail end of the strike when the strike was in their last days. But the biggest impact of the UAW strike was the behavior of the other buyers, particularly the middlemen, particularly the service centers and distributors, that in anticipation of a disaster that they were expecting on demand and prices, they stopped buying. And then when an entire sector goes black, an entire sector does not buy anymore, price goes up. And that’s what happened last year. We are not anticipating, Bill, at this point, that nothing like that will happen this year. So we are expecting at the end of the day a much more stable, a much more normal year in 2024, and that’s why we are basically anticipating a flat year in terms of shipment, 16.4 million tons last year, 16.5 million tons this year, no change in mix.
Bill Peterson: Yes, and it’s for the first quarter, how should we think about mix, your own mix?
Lourenco Goncalves: I’m sorry, Bill, can you say it one time?
Bill Peterson: Yes, just the second part of my question was how to think about the product mix for your business in the first quarter given the step down coated volumes in the last quarter?
Lourenco Goncalves: Yes, go ahead, Celso.
Celso Goncalves: Yes, hey Bill, it’s Celso. Some general talking points on the first quarter. In terms of mix, you know, you should see a similar mix in Q1 relative to Q4. From a shipment standpoint, Q1 should be a, you know, a slight increase from Q4. And then from an average selling price standpoint, you can probably plug around $60 a ton increase as we start to see benefit from lags on index pricing and things like that. And then in terms of costs, we’re going to have a big benefit from lower raw materials and coal, but that’s not going to hit until Q2. So those are kind of the general estimates for Q1 that you can think about.
Bill Peterson: That’s helpful color. And for my second question, and look, I realize your views on the NSC U.S. deal is clear, but should the deal go through and realize the current plan is to return capital to shareholders, as well as debt pay down, but would you see the need to bolster your footprint or improve your technical capabilities in order to compete moving forward? And if so, I guess what kind of assets would Cliffs’ maybe look to require anything downstream for the electric steel, something else?
Lourenco Goncalves: Look, we don’t see the need to do anything. We believe that we have a fantastic footprint. We have a fantastic position in terms of our feedstock and our ability to control our own destiny. So we don’t see the need to do anything. But we continue, Bill, to see opportunities. Technologically, we are ahead. In terms of quality, we are ahead. But don’t forget, we built a steel company in three years with that we paid the debt down to a point that nobody would anticipate. It’s like buying a big house with a big mortgage, 30-years, and everybody will be happy to keep paying every month for 30-years, and then in three years you’re done. You paid off the mortgage. That’s what we did here. And investors need to recognize that.
When we see a target that is completely underappreciated like U.S. Steel, U.S. Steel is trading based on the cash on hand. Everybody, someone else was believing that they could do a better job than that management team that is squattering there. And I agree with them. That’s why I made an offer to bring them to the role of companies that trade based on some type of fundamentals and not just on cash on hand. And that my first offer and was a good one. But then things got crazy, because that board did not want to sell to Cliff, Spirit full stock. They would like to bring the back of the union. That’s what they are doing. Let’s talk Turkey here. That management team and that board had one goal in mind, and the goal was to bring the back of the United Steelworkers.
And by breaking the back of the United Steelworkers to break the back of the United Labor in America, I am a big supporter of United Labor, because it goes against bosses like Dave Burritt. These type of people need to go. So that’s my take on U.S. Steel. Do I need to do more color or that’s enough?
Bill Peterson: No, no, that’s good and it’s clear that our — you have what you need to compete. So I appreciate the insights here and good luck in 2024 and the execution ahead.
Operator: Thank you. Our next question comes from the line of Alex Hacking with Citi. Please proceed with your question.
Alex Hacking: Yes. Good morning, Lourenco, Celso. So I just have one question. Hey, how are you? On the $30 a ton cost guidance, what volume do you realistically need to achieve that, right? You’re guiding to 16.5 million tons. Could you achieve that level of cost reduction at 16 million tons? Any color there on that relationship would be helpful. Thank you.
Celso Goncalves: Yes. I mean that’s what we’re assuming, Alex. We’re — like we said, we’re at 16.4%. Last year, we’re going to be at 16.5% this year. That’s what we need to continue to lower our cost. We’ve done a lot of cost reduction over the last few quarters, but there’s still a little bit more to go and that’s what we’re sticking with. We’re confident in achieving that cost reduction during the whole year. It’s not necessarily going to come next quarter, but it’s going to — you’re going to see that throughout the year given the volume assumptions that we have.
